HFC Phasedown Is Good for the Climate & Good for Business

Here’s something you don’t see every day: an entire industry and the environmental community aligned in support of an international agreement to curb dangerous climate pollutants—chemicals called hydrofluorocarbons (HFCs) used in air conditioning, refrigeration, insulation, and propellant applications.

At a stakeholder meeting held last Friday, both industry and environmentalists pressed the EPA to voice its support for the Kigali Amendment to the Montreal Protocol—which calls for a global phase-down of HFCs—by urging the Trump administration to submit the agreement to the U.S. Senate for ratification. Though the Kigali agreement enjoys bipartisan support in the Senate, and though the White House expressed support for its goals and objectives last fall, the administration has been dragging its feet on sending it to the Senate.

Instead, the EPA is focused on dismantling the one HFC control regime already in place: rules adopted in 2015 and 2016 under the Clean Air Act’s Significant New Alternatives Policy (the “SNAP Program”) to limit the use of HFCs where safer alternatives have become available. Those rules are under a cloud due to an adverse court ruling last year that struck part—but only part—of the rules. The case isn’t over yet, however, because NRDC and two companies that make safe alternatives are appealing it to the Supreme Court.  

Administrator Pruitt’s EPA initially defended those rules, but lately has switched sides. Instead of enforcing the part of the rules that the court upheld and moving quickly to restore the HFC limits that were questioned, the EPA has lifted them in their entirety, without any notice or opportunity for comment. The agency holds out the vague promise for a new rulemaking that might someday put some of the HFC use limits back in place—or might tear down the entire SNAP Program instead. 

SNAP Rules and Legal Challenge

Because HFCs are powerful drivers of climate change, NRDC and others petitioned EPA years ago to use its authority under Section 612 of the Clean Air Act—which created the SNAP program—to set deadlines for ending the use of HFCs where safer alternatives have become available. In response, EPA issued two SNAP rules setting deadlines for transitioning from the most harmful HFCs to climate-friendlier alternatives in specific uses, such as motor vehicle air conditioning, supermarket refrigeration, foam blowing, aerosols.

Two chemical producers, Mexichem and Arkema, sued to block the rules. Two other producers offering climate-friendly alternatives to HFCs, Honeywell and Chemours, intervened on EPA’s side, as did NRDC. As mentioned, the Pruitt EPA initially defended its rules in court. But a divided panel of the U.S. Court of Appeals for the District of Columbia Circuit partially struck down the first rule last August in Mexichem Fluor, Inc. v. EPA. NRDC and our industry co-intervenors asked that court to rehear the case and correct the panel majority’s erroneous ruling. After the D.C. Circuit declined rehearing, NRDC and our allies are now preparing to appeal the decision to the Supreme Court.

EPA’s “Guidance” and Stakeholder Meeting

Meanwhile, EPA has issued a so-called “guidance” document on how the agency will implement the Mexichem ruling. The Mexichem panel unanimously affirmed EPA’s authority to change the status of a substitute from acceptable to unacceptable, and upheld the HFC listing changes against arbitrary and capricious challenges. Yet EPA’s guidance went well beyond the partial vacatur ordered by the Mexichem majority to conclude that “EPA will implement the court’s vacatur by treating it as striking the HFC listing changes in the 2015 Rule in their entirety.”

Last Friday the agency held a stakeholder meeting to solicit input, after the fact. More than a hundred people attended, representing the wide range of industries affected by the SNAP program, as well as key environmental organizations.

NRDC weighed in with our concerns about the signals that EPA is even considering dismantling the SNAP Program. And we honed in on the legal violation represented by the “guidance” document. Striking the valid portions of the HFC rules through “guidance” without a proposal and opportunity for public comment is a clear violation of basic administrative law—and NRDC will likely go to court to challenge this latest lawless act from the Pruitt EPA. 

Here are some of my remarks:

EPA purports to have initiated this stakeholder process and issued its recent guidance to provide regulatory certainty. But both the guidance and stakeholder process are in fact causing greater uncertainty—because litigation over these very issues is still ongoing, as NRDC and others are seeking Supreme Court review of the ruling in Mexichem v. EPA.

In a March letter to the agency, NRDC asked EPA to stand by these rules, which enjoy broad support from industry as well as environmental organizations. We asked EPA to join in appealing the erroneous court ruling to the Supreme Court, and we urged the agency to wait until the Mexichem litigation is resolved before, if necessary, beginning a regular process to make changes—with stakeholder engagement and notice and comment rulemaking. We renew those requests here today.

For more than two decades, the SNAP Program has continued to push innovation toward safer substitutes, always with the central purpose of reducing overall risk to human health and the environment. When all of this litigation is resolved, we believe that the Mexichem decision will be reversed and the 2015 and 2016 rules upheld. And even if not, multiple avenues remain for EPA to restore the limits on the use of HFCs set in those rules.

For now, the prudent thing to do is to stay on course, not to lift the rules that remain valid and start an uncertain journey to unnecessarily overhaul the SNAP Program.

Support for the Kigali Amendment

The most heartening part of the EPA stakeholder meeting was the nearly unanimous support for the Kigali phase-down agreement from HFC producers and users. To EPA’s apparent surprise, speaker after speaker spoke up in favor of ratifying the Kigali Amendment and in support of transitioning away from HFCs toward climate-friendlier chemicals. Industry participants expressed concern that in the absence of federal leadership they will face a patchwork of state-level restrictions. And they worried that they will lose market share to foreign competitors and tens of thousands of jobs will be lost if the U.S. doesn’t ratify Kigali.

In fact, last week the Alliance for Responsible Atmospheric Policy, a U.S. trade association, released an economic report finding that U.S. ratification of the Kigali Amendment, a global agreement to phase down HFCs, will result in 33,000 new U.S. jobs and a $12.5 billion increase in U.S. annual economic output by 2027.

The benefit numbers climb to 150,000 jobs and $38.8 billion when indirect benefits (those that extend to suppliers) and induced benefits (those generated from additional earned income) are included. More than 1 million Americans are employed in industries that are positively affected by the agreement.

Stakeholders from all across industry know which way the wind is blowing, and have already invested billions of dollars in making safer alternatives and redesigning their products to use them. Both industry and environmentalists recognize that the HFC transition is good for the planet and good for business, and that’s why nearly everyone is urging the EPA and the Trump administration to stay with the program.

The Alliance study also identifies an eyebrow-raising trade advantage: U.S. exports of products using refrigerants—such as heating, ventilation, air conditioning, and refrigeration (HVACR) equipment—are projected to fall as a share of the global market unless the Kigali Amendment is ratified. If it is, the U.S. share of the global market will increase from 7.2 to 9.0 percent, helping reduce our overall trade deficit.

Often led by U.S. companies and associations, the world’s refrigerant and HVACR industries nearly unanimously supported the Kigali Amendment during the years it was negotiated. Companies have learned the value of leadership at the treaty: as it is strengthened to include greater reductions and additional chemicals, the Montreal Protocol ushers in demand for next-generation technologies that are better for the atmosphere, use less energy, and better serve customers.

The Alliance report offers a more data-driven economic assessment of the Kigali Amendment than a recent Heritage-sponsored paper that raises the specter of higher consumer costs but offers little supporting evidence.

Montreal Protocol scientists estimate that the Kigali Amendment alone will avert 0.22 – 0.44°C of surface temperature increase by 2100. The Montreal Protocol saved the ozone layer from collapse and is already humanity’s greatest contribution to reducing climate change. The Kigali Amendment to the Montreal Protocol is expected to avoid the use of super-polluting HFCs equivalent to at least 70 billion tons of CO₂ worldwide over the next 30 years, about twice the annual greenhouse gas emissions from all sources on earth. 

This time, NRDC and industry agree—protecting the climate is good business. EPA and the Trump administration should get on board.

This post was co-authored by Alex Hillbrand.